BlackBerry stock falls after Goldman downgrade on heels of Z10 launch

BlackBerry shares tumbled Monday after Goldman Sachs Group Inc. cut its rating on the struggling smartphone maker, citing a disappointing debut for the company’s Z10 phone in the U.S.

Markets today

Britain’s FTSE 100
6,378.38 -14.38 -0.22%

Japan’s Nikkei
12,546.46 +207.93 +1.69%

Australia’s S&P/ASX 200
4,990.20 +22.90 +0.46%

Hong Kong’s Hang Seng Index
22,251.15 +135.85 +0.61%

The shares fell more than 4.5% to US$14.23 in New York, following a decline of 7.7% on Friday. Before the two-day drop, the stock had climbed 36% this year, lifted by optimism that the company’s new lineup would fuel a turnaround.

Shares also fell about 4.5% to $14.51 on the Toronto Stock Exchange on Monday.

The Z10 went on sale last week in the U.S. — BlackBerry’s biggest single market — almost two months after its rollout in the U.K. and Canada. The country is “critical for BlackBerry’s ultimate success,” said Goldman Sachs analyst Simona Jankowski, who found that initial sales at AT&T Inc. and Best Buy Co. stores were “tepid.”

“Our retail checks at over 20 store locations since March 22, including at AT&T, Best Buy, and RadioShack, revealed a surprising lack of marketing support and poor positioning of the product,” she said in a report today. “We also saw limited advertising around the launch.”

Jankowski cut her rating on the stock to a neutral and now gives the new BlackBerry lineup a 20% chance of being successful, down from 30%.

Meanwhile, Jefferies released its own report on BlackBerry Monday, noting that its store checks showed demand for the Z10 in the U.S. was slightly better than its admittedly modest expectations.

“Some stores were out of stock but expected replenishment shipments this week,” the investment firm said.

Jefferies also notes that demand for the device from AT&T’s business users could “account for a meaningful portion of demand.”

Cypriot policy-makers agreed a deal with the European Union, the European Central Bank and the International Monetary Fund to shut down its second largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for US$13-billion bailout.

Markets reacted positively to the news early on Monday, but pulled back later after a senior eurozone official said the Cyprus bailout reached earlier could be a new template for resolving regional banking problems by shifting more risk to depositors and stakeholders.

The Cyprus rescue forced depositors and bank bond holders to bear losses, a deal that could become a template for future bank restructurings in the eurozone, said Dutch Finance Minister Jeroen Dijsselbloem.

“What we’ve done last night is what I call pushing back the risks,” Dijsselbloem, who heads the Eurogroup of eurozone finance ministers, told Reuters and the Financial Times.

A longer-lasting concern is how the Cyprus deal plays out in other countries, notably those at the forefront of Europe’s debt crisis. Analysts warned there there is still a risk of contagion spreading to other weak eurozone countries such as Spain, Italy and Greece.

Investors also kept a wary eye on the other major trouble spot in the eurozone as Italy had to pay slightly higher interest rates to raise (euro)3.8 billion in bond sales. The treasury paid a rate of 1.75% in the sale Monday, up from 1.68% at the last such auction last month.

Center-left leader Pier Luigi Bersani is holding consultations on forming a new government following elections last month that ended with no clear winner. He is expected to announce his results in coming days.

Dell founder to sweeten buyout bid?

Michael Dell, whose quest to take Dell Inc. private is threatened by bids from Blackstone Group LP and Carl Icahn, is likely to boost his offer as he strives to transform his company from fallen personal-computer leader into a contender in tablets and cloud computing.

Dell confirmed Monday it had received alternative buyout offers from Blackstone Group LP and Carl Icahn, following a US$24.4-billion agreement last month to be taken private by its founder and private equity firm Silver Lake.

The company said a special committee of board members has determined the bids from buyout specialist Blackstone and Icahn could be superior to a proposal from Dell and Silver Lake Partners to buy the Round Rock, Texas, company for US$13.65 per share.

The Securities and Exchange Commission approved Nasdaq’s request to change its rules and expand the compensation pool for member firms in the May 18 initial public offering. The funds will go to traders who lost money after a design flaw in the exchange’s computers delayed Facebook’s open and left traders confused about how many shares they owned.

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